NewProduct Development and Product LifeCycle Strategies

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New-Product Development and Product Life-Cycle
Strategies
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New Product Development(NPD) Strategies
Original Products
Acquired Companies
Product Improvements
Acquired Patents
Product Modifications
Acquired Licenses
New Brands
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What is New Product?

• New-to-the world products g new products that
  create an entirely new market
• New product lines g that allow a company to enter
  an established market for the first time
• Additions to existing product lines g new
  products that supplement a companys established
  product lines
• Improvements and revisions g new products that
  provide improved performance or greater perceived
  value
• Repositioning g existing products that are
  targeted to new markets
• Cost reductions g new products that provide
  similar performance at lower cost

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Why New Products Fail

• Overestimation of market size
• Product design problems (poor design)
• Product incorrectly positioned, priced or
  advertised (poor marketing execution)
• Product may have been pushed despite poor
  marketing research findings
• High costs of product development
• Strong competitive reaction

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Challenges in NPD

• Idea shortage
• Fragmented markets
• Social and governmental constraints
• Cost
• Capital shortage
• Need for speed
• Shorter product life cycles

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NPD Process
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NPD ProcessStep 1. Idea Generation
Systematic search for new product ideas obtained
internally from employees and also from
Distributors
Suppliers
Customers
Competitors
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NPD Process Step 2. Idea Screening

• Process to spot good ideas and drop poor ones as
  soon as possible.
• Many companies have systems for rating and
  screening ideas which estimate
• Market Size
• Product Price
• Development Time Costs
• Manufacturing Costs
• Rate of Return
• Then, the idea is evaluated against a set of
  general company criteria.

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NPD Process Step 3. Concept Development
1. Develop New Product Ideas into Alternative
Detailed Product Concepts
2. Concept Testing - Test the New Product
Concepts with Groups of Target Customers
3. Choose the One That Has the Strongest Appeal
to Target Customers
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Concept Development (Example)

• A large food processing company gets the idea of
  producing a powder to add to milk to increase its
  nutritional value and taste g The product idea
• The product idea should be transformed to product
  concept by answering some questions
• Who will use the product?
• What primary benefits should this product
  provide?
• When will people consume this drink?

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Concept Development (Example)

• Concept 1 An instant breakfast drink for adults
  who want a quick nutritious breakfast without
  preparing breakfast
• Concept 2 A tasty snack for children to drink as
  a midday refreshment
• Concept 3 A healthy supplement for older adults
  to drink in the evening before they go to bed

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Concept Testing

• Presenting the product concept to appropriate
  target consumers and getting their reactions
• Computer-aided design
• Virtual reality programs that stimulate the
  reality
• Presenting consumers an elaborated version of the
  concept (see example)
• Description of the new concept should include
• Basic benefits and functions of the product
• Package size
• Price level or price range
• Some product dimensions are evaluated based on
  the answers of consumers

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Concept Testing (Example)

• Elaboration of Concept 1
• Our product is a powdered mixture that is added
  to milk to make an instant breakfast that gives
  the person all the needed breakfast nutrition
  along with good taste and high convenience.
• The product would be offered in 3 flavors
  chocolate, vanilla, and strawberry and would
  come in individual packets, 6 to a box, at 2.49
  a box.

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NPD Process Step 4. Marketing Strategy
Part One Describes Overall Target
Market Planned Product Positioning Sales Profit
Goals Market Share
Part Two Describes First-Year Products Planned
Price Distribution Marketing Budget
Part Three Describes Long-Term Sales Profit
Goals Marketing Mix Strategy
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Step 5. Business AnalysisStep 6. Product
Development
Business Analysis Review of Product Sales,
Costs, and Profits Projections to See if They
Meet Company Objectives
If No g Eliminate Product Concept
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NPD Process Step 7. Test Marketing
Budget Levels
Product
Stage where the product and marketing program are
introduced into more realistic market settings
Packaging
Positioning
Advertising
Branding
Elements that May be Test Marketed by a Company
Distribution
Pricing
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Test Marketing - Approaches
Standard Test Market Full marketing campaign in
a small number of representative cities.
Controlled Test Market A few stores that have
agreed to carry new products for a fee.
Simulated Test Market Test in a simulated
shopping environment to a sample of consumers.
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NPD Process Step 8. Commercialization

• Main issues in commercialization
• Introduction timing
• Where to launch the new product
• Few companies can launch new products into full
  national or international markets
• Planned market rollout over time
• To whom to introduce new product

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Product Life Cycle (PLC)
Sales and Profits Over the Products Life from
Inception to Demise
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Sales Profit Life Cycles
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Applications of the PLC

• The PLC concept can describe a
• Product class which has the longest life cycles,
• Product form which tend to have the standard PLC
  shape,
• Brand which can change quickly because of
  changing competitive attaches and responses,

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Other Shapes of PLC

• 3 special categories of PLC
• A style g can last for generations, going in and
  out of vogue
• A fashion g is currently accepted popular style
  in a given field
• Fads g are fashions that come quickly into public
  view, are adopted quickly, peak early, and
  decline very fast they do not satisfy a strong
  need

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Problems Using the PLC
Some problems arising relating to PLC concept
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Introduction Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
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Four IntroductoryMarketing Strategies
Rapid- skimming strategy
Slow- skimming strategy
Rapid- penetration strategy
Slow- penetration strategy
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Growth Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
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Maturity Stage of the PLC
Summary of Characteristics, Objectives,
Strategies
Sales
Peak sales
Costs
Low cost per customer
Profits
High profits, then lower profits
Maximize profits while defending market share
Marketing Objectives
Product
Diversify brand and models
Price
Price to match or best competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits
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Maturity Stage of the PLC (cont.)
Modifiying the Market

Company tries to increase
consumption of the current product.
Modifying the Product
Changing characteristics such as quality,
features, or styles to attract new users.
Modifying the Marketing Mix

Company tries to improve sales by changing
one or more marketing mix elements.
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Maturity Stage of the PLC (cont.) Market
modification

• Sales volume number of brand users x usage rate
  per user
• To expand the number of brand users by
• Converting nonusers
• Entering new market segments
• Winning competitors customers
• To convince current brand users to increase their
  usage of the brand
• Use the product more frequently
• Use more of the product on each occasion
• Discover new product uses

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Maturity Stage of the PLC (cont.) Product
Modification

• To modify the product characteristics through
• Quality improvement g to increase product
  functional performance (durability, reliability,
  speed, taste, etc)
• Feature improvement g to add new features (size,
  weight, materials, accessories)
• New features g serve to build the companys image
  as an innovator and win the loyalty of market
  segments that value these features
• Style improvement g to increase the products
  aesthetic appeal

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Maturity Stage of the PLC (cont.) Marketing Mix
Modification

• Sales could be stimulated by modifying other
  marketing mix elements
• Prices - Would a price cut attract new buyers?
• - Would it be better to raise the price to
  signal high quality?
• Distribution - Can more outlets be penetrated?
• - Can the company introduce the product
  into new distribution channels?
• Promotion - Should advertising axpenditures be
  increased?
• - Should the media mix be changed?
• - Should the number or quality of
  salespeople incraesed?

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Decline Stage of the PLC
Summary of Characteristics, Objectives,
Strategies